New Electronic Delivery Option for ERISA Retirement Plan Information (US)
There is a new electronic delivery option for retirement plan sponsors who are looking for an easier and more efficient means of providing required plan information disclosures to plan participants and beneficiaries. Retirement plan administrators can now electronically notify participants and beneficiaries that certain disclosures are available on a specified website. In addition, retirement plan administrators can more easily directly deliver the disclosures by email. Participants and beneficiaries must be able to opt out of electronic delivery and to request paper copies of disclosures without cost. Notably, the new option is not approved for delivery of health and welfare plan disclosures at this time.
Background. Current rules for electronic delivery of documents date back to 2002, and many employers have found them difficult to utilize.
The 2002 rules allow employers to use electronic delivery only for employees who (a) are “wired at work” (i.e., those who could access electronic disclosures at their job sites and who utilized their employers’ electronic information systems as an integral part of their jobs), or (b) affirmatively consent to receive documents electronically. The consent requirements are difficult because they require advance disclosure and identification of all documents and identification of necessary hardware and software requirements. In addition, the consent must be updated if hardware and software requirements change.
The new rule from the Department of Labor is not as onerous in terms of obtaining employee consent for electronic disclosures. It should make it easier and less expensive for plan administrators to distribute required retirement plan disclosures – particularly given the logistical and economic challenges that employers are facing as a result of the COVID-19 pandemic. Some of the details follow.
Covered Individuals. The new electronic delivery rule can be used for any participant, beneficiary or other individual who is entitled to receive retirement plan, including multiemployer plan, disclosures under ERISA. All the individual has to do is provide the plan administrator with an “electronic address,” such as an email address or mobile phone number that can receive text messages.
In addition, electronic addresses assigned by the plan sponsor to an employee are acceptable if they are assigned for an employment related purpose, other than the delivery of benefit plan disclosures. Plan administrators also can use electronic addresses collected from employees and other individuals for plan enrollment purposes.
Covered Documents. Plan administrators can use the new rule to deliver any retirement plan disclosures required under Title I of ERISA, except those that must be furnished only upon request. Covered documents include, for example, summary plan descriptions, annual benefit notices, summary annual reports, black-out notices, adverse benefit claim determinations, QDRO determinations, notices of failure to meet minimum funding standards, annual funding notices, annual investment related information, and description of fees for plan administrative services. The rule does not cover health or welfare plan disclosures, though a possible expansion is under consideration.
Initial Notification. Before utilizing the new rule, plan administrators must distribute a paper notice to covered individuals informing them that some or all covered documents will be furnished electronically. This initial notice must describe the rights of covered individuals to obtain a paper version of any covered document free of charge and to opt out of the electronic delivery system completely and include an explanation of how to exercise these rights. It also must identify the specific electronic address that will be used for sending electronic disclosures to the employee (or other recipient), giving that person the ability to identify and correct inaccuracies.
Unlike the 2002 rules, the new rule does not require the employee or other recipient to affirmatively sign a consent. Nor does it require the notice to specify hardware and software requirements.
Website Posting. Under the new electronic delivery rule, plan administrators can satisfy disclosure requirements by posting covered documents on a website, notifying the employee (or other recipient) about the availability of the documents, and meeting certain other conditions.
The starting point is the issuance of an electronic Notice of Internet Availability (NOIA) to the employee or other recipient at the time that the required disclosure becomes available on the website. The NOIA must identify the document being made available and, if needed to convey the nature of the document, briefly describe the document being made available on the website.
In addition, the NOIA must:
- Prominently state (g., as a title or subject line), “Disclosure About Your Retirement Plan” and include a statement that reads, “Important information about your retirement plan is now available. Please review this information”
- Provide the internet address or a hyperlink to the address where the document can be found and any additional instructions needed to access the document.
- Inform recipients of their rights to obtain a paper copy of the document at no cost and to opt out of electronic delivery.
- Caution recipients that a document is not required to be available on the website for more than a year or, if later, until it is superseded by new version (so that recipients are aware that, if desired, they should save the documents in electronic format on a personal computer or print them to save a hard copy). Notably, while covered documents need not be available online indefinitely, they must be available from the employer upon request in accordance with record retention and other requirements under ERISA.
The NOIA is intended to be succinct and easily understood. It must be distributed by itself – without other documents or unrequired content. While a separate NOIA generally is required for each disclosure, the final rule allows a combined annual NOIA for a plan’s summary plan description and any covered disclosure that must be furnished annually (rather than upon the occurrence of a particular event) and that does not require recipient action by a specified deadline. Benefit denials, quarterly benefit statements and blackout notices, for example, cannot be part of an annual NOIA. Additional disclosures can be included in the annual NOIA if authorized by the Secretary of Labor or the Secretary of Treasury.
Disclosures must be posted to a website in a widely available format that can be read online or printed, is searchable, and can be saved to a personal computer.
Direct Delivery. In addition to website posting of required disclosures, the new rule permits direct delivery of required disclosures in the body of or as an attachment to an email. However, while direct electronic delivery of required disclosures is permitted by email, it is not permitted by text message. A NOIA is not required but, as with NOIAs, the email must be written in a manner calculated to be understood by an average plan participant. It also must include the following information:
- A subject line reading: “Disclosure About Your Retirement Plan.”
- Identification of the document and, if needed, a brief description.
- A statement of the right to a paper copy free of charge and to opt out of electronic delivery.
- Contact information, including a phone number, for assistance.
Former Employees. In order to use the new electronic delivery rule for disclosures to former employees, the plan administrator must ensure that the electronic address that had been used for while the individual was employed will continue to be effective in reaching employees following a severance or obtain a new address that will be effectively reach those individuals.
Effective Date and Transition Rules. The new rule was published in the Federal Register on May 27, 2020. It will be located at 29 CFR §2520.104b-31.
The new rule is legally effective 60 days following publication of the regulation in the Federal Register. However, it can be utilized sooner, as the Labor Department will not take enforcement action against a plan administrator that relies on it before the effective date.
 See 29 CFR 2520.104(b)-1(c).